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Online Loans 101: Understanding the Process, Risks, and Rewards

Aug 17, 2021

At some point in our lives, we may find ourselves curious about, and checking out, a loan online. While almost all of us strive to be financially resilient and veer away from getting cash and loan outside family, or via loan companies, things sometimes happen, necessitating borrowing funds.

Online loans work in much the same way a traditional bank loan works, but with less stringent requirements and less aggravation. The entire process to get cash loan can be completed without the borrower setting foot inside a bank branch.  Online loans may have favorable terms, and often because of the source of the funds. Because there are no customer-facing personnel and an infrastructure like a bank, most online loan companies are able to offer lower interest rates. The interest rate covers the cost of borrowing.

In a nutshell, the online lending company, through an automated process, screens the borrower and/or the investment project. Once the online loan is approved and disbursed, the loan repayment is monitored, and in the event of default, carried out measures or means to enforce repayment.

Some of the most popular online loans in the Philippines, as assured by those in the business of lending money in a jiffy, may help certain individuals manage their finances. Resorting to online lending with low interest can be quite helpful for people. Certain apps, though, may cater more to the underserved market of urban working professionals. What most people do, instead, is conduct a thorough search, while at the same time getting testimonials, from others who have tried and tested the best online loan platforms operating in the country.

Not all online loans are created equal. Certain online lenders may grant approval to borrowers with a wide variety of credit scores.  As for investors or lenders who comprise the other vital part of the equation, returns from loan repayments, which are higher than what one may earn from a traditional bank account, and control over funds, make the alternative form of financing worthwhile. Investors who are willing to take part in online lending get to help small, aspiring business owners launch their ventures and generate income.

Lending money Philippines style is governed by laws.  Unless the lending company violates any provision of the Corporate Code, the Lending Company Regulation Act or any other laws regulating loan companies, then the Securities and Exchange Commission exercises no authority over it. A lending company in Manila with low interest can be a magnet for Filipinos young and old alike who need extra funds fast.

Traditional Approach to Obtaining Loans

Way before the advent of mobile apps and online platforms, individuals or business entities queued at their bank neighborhood, responded to queries by a consumer loan account representative, and endured a tedious process while waiting a long time for final approval of a money loan.

For some individuals, modern, faceless ways to apply for cash loan are more suitable and far less intimidating. Reasons like racial biases, stereotyping, and other negatives are often eliminated by taking the online route.   Beyond that, the traditional approach of getting a money loan, which is heading to the bank or physical branch of a lending agency, carries the main  downside of a complex and drawn-out approval process, especially for people falling in the high credit risk category.

There is also the stigma of facing rejection. The marginalized sector, or low-income people, has, for the longest time, been a market which banks were wary of or were unwilling to enter. The rise of professional online lending companies and the convergence of web services, peer-to-peer networks, and social networks, all of which aim to address growing customer requirements and issues, augured well for the online loan industry, in general.

Nowadays, an online visitor simply needs to type words like “loans near me open now” or “best online loans” to get an online lending company listing. An easy cash loan may possibly be availed at a low interest rate and easy terms. It all depends on the loan amount sought and set criteria.

Online banking, particularly online loan transactions, have evolved and undergone improvements over the past years as communication technologies progressed. Digital mortgage websites and apps represent a step-up from old-school ways of obtaining a money loan. Prospective borrowers just need to upload needed financial information, and acquire a customized online loan that comes with certain criteria. The interest rates will also be shown by the dashboard or site of the company lending money online.

The peer-to-peer (P2P) lending platform is a type of online transaction system that has grown by leaps and bounds. The most innovative feature of P2P lending lies in the lending process.

Getting a loan online through am efficient P2P platform not only offers customers competitive rates, but also quick validation, fast approval, funding and disbursement. For as long as the documents requested to be uploaded are complete, the entire lending process is swift and may take just a matter of days.

 A paper published in the Journal of Electronic Commerce in Organizations tracing the rise of peer-to-peer lending in microfinance, the borrowing mechanisms at work with a P2P or online loan transaction follow mainstream conventional approaches, but with greater convenience to end-consumers. At the heart of it is facilitating greater financial inclusion for underserved market segments, particularly small, aspiring entrepreneurs who lack collateral, and also do not have credit history, much less a documented record of conducting business.

With the rise of non-bank lending firms and the P2P lending company model, even underprivileged people who are venturing into their own business for the first time, and need a cash boost, are able to directly borrow small increments of loans online.

How Online Loans Serve as Quick Fixes

Online loans with monthly payments have become very convenient for cash-strapped Filipinos. Getting a cash loan online, through a reliable P2P funding platform like Blend.ph, has proven to be suitable for many different types of consumers: single working professionals or young borrowers, couples raising families; retail investors or small entrepreneurs, and so on. The main advantages are the easy access to information, including feedback from the lending organization or P2P platform; flexibility; and hassle-free – not to mention low-cost – transaction.

People have varying borrowing needs and requirements that prompt them to try getting a cash loan online. A prequalification process is often conducted. A pioneering P2P lending company like Blend.ph — which offers an array of short-term loans and can open lines of credit for businesses that need to take off or expand –works with funding partners to swiftly process loan applications. Beforehand, it may send invites to franchise partners and other eligible prospects for new online loan accounts.

The Many Uses of Online Loans

An online loan, or any of various specific types of loans ranging from a fast loan, to personal loan, seafarer loan, or franchise loan, can greatly ease funding worries.  Extra funds for travel, home improvement, medical needs, or school fees/education may be funded by a personal loan, and the interest rate depends on the risk type. Financial technology (fintech) companies offer personal loans online. A quick online search can reveal an assortment of personal loans Philippines.

A fast loan, owing to its short-term nature, may command a higher interest rate per month. Then, there is the franchise loan, which many creditworthy small business owners get qualified for. This segment is among the most preferred by loan companies.

Lending companies in the Philippines, or online lenders, may offer lines of credit, term loans and accounts receivable financing. At a glance, small business owners or franchisees may find online loan information and be able to compare several loan offers all at once to get the best deal possible.

Essential Things to Know When Selecting Online Loan

Before transacting with an online loan platform, check its track record of experience. From the borrower’s end, it is very important to consider the income factor, or the ability to pay off a loan. Dive even deeper and understand terminologies like average interest rate or actual yearly cost of funds over the selected term of the loan.

There are many benefits to getting an online loan. You can get a good deal even if your credit score is not that stellar. Nonetheless, you may avoid pitfalls and headaches by keeping these tips in mind. 

  1. Educate yourself about the online loan process and make an honest assessment of your finances. P2P platforms offering online loans ought to have customer service available through phone, email or secure direct messaging channels via an official social networking site.
  2. Give careful thought to the loan amount and term of online loan. Be realistic and see if you will be able to afford the monthly payment, since you will need to pay back the full amount of the loan plus the interest. Devise a plan for paying the loan back. The least you want to happen is to sink into debt for a lifetime.
  3. To avoid loan applications being rejected by the automated system, submit the requirements at the given timeframe.
  4. Pay the monthly loan amount on or before the due date. Not making timely payments can be harmful to one’s credit score. A good borrowing record counts.

For help or clarifications when customizing online loans to fit your financial purpose, visit https://blend.ph/borrower/.